The inter-bank rate last week rose by 179 basis points to 14.1 per cent, following the slowdown of the Central Bank of Nigeria (CBN’s) liquidity management exercise.
Consequently, the call/overnight and seven-day money market rates inched up to 14.08 per cent and 14.12 per cent on July 16 and 17.
The three-month Nigeria Inter-Bank offered Rate (NIBOR) also traded on 14.87 per cent, though less activities are done on the tenor. The inter-bank secured lending (Open Buy Back) rose 13.79 per cent for commercial banks and 14 per cent for discount houses.
Currencies Analyst at Ecobank Nigeria, Olakunle Ezun confirm that the liquidity status was partly due to slowdown in CBN’s management exercise from June to-date. The CBN offered and sold $300 million on July 15 at N155.76 to support the naira.
He said the CBN’s liquidity management remained active and supported by the circular issued on August 1, reviewing its guidelines for how banks access its Standing Lending Facility window and Wholesale Dutch Auction System forex auction this he said is in addition CBN’s Monetary Policy Committee decision to hold the rate unchanged at 12 per cent on 21 May, this year.
He said the naira will continue its downward trend this week as impacts of strong market demand and falling reserves bite harder. For him, the trend will persist although the CBN remains poised to support the currency’s short term outlook through monetary operations and robust foreign exchange reserves of $47 billion (about 12 months of imports equivalent).
He said the naira will continue to depreciate within the week, reiterating investor’s “wait and see attitude” on the naira short term outlook.
The global crude oil price (Bonny Light) was broadly steady on $109.0/bbl even as the volatility remains elevated and continued to reflect deep uncertainties in global economies.
Global economy
The dollar is undermined by uncertainty over timing of Federal Reserve’s “tapering” of quantitative easing and Federal sequestration spending cuts that could slow growth. But as monetary policy expansion slows, dollar is expected to strengthen, thereby boosting economic recovery.
Euro volatility is heightened and will remain elevated until Euro Union leaders confirm policy move towards greater fiscal integration and joint banking sector regulation. European Central Bank support however, remains crucial in underpinning Euro outlook.
Financial Inclusion
The apex bank has emphasised the need for stakeholders’ support in its drive to achieving targets set in the Nigerian Financial Inclusion Strategy (NFIS).
CBN Governor, Sanusi Lamido Sanusi, disclosed this at the launch of the Geospatial mapping of Financial Institutions in Nigeria in conjunction with the Bill and Melinda Gates Foundation (BMGF).
He said the target outlined in the NFIS strategy is the reduction of the number of adults excluded from access to financial services from 46.3 per cent in 2010 to 20 per cent in 2020. As a member of the Alliance for Financial Inclusion (AFI), he said Nigeria’s declaration was in line with the Maya declaration in 2011.
According to him, it is targeted that at least 70 per cent of the proposed 80 per cent adult Nigerians to be financially included, would be in the formal sector, with specific targets for services such as payments, savings, credit, insurance and pensions. To achieve this however, he said there must be collaboration among all the stakeholders in the financial industry.
Sanus said the CBN had since approved a number of initiatives aimed at improving financial inclusion. He listed some of these initiatives to include the development of Agent Banking Guidelines, tiered Know-Your-Customer (KYC) requirements to encourage Financial Institutions to reach out to under-served segments, the development of a Consumer Protection Framework under a newly set up Consumer Protection Department and a National campaign to promote Financial Literacy.
AfDB
The African Development Bank (AfDB) is planning to raise as much as $1.5 billion in local-currency bonds in Nigeria and Zambia to finance infrastructure projects. This became exigent as emerging-market bond yields rise on speculation the Federal Reserve will reduce economic stimulus, Bloomberg report said.
The AfDB, which gives money to African governments for projects in areas such as roads, ports and energy, is completing the planned size of the medium-term note programmes and is in talks with authorities in the two countries, Olivier Eweck, financial technical services manager in the bank’s treasury department, said.
“Before the end of the month we would have made up our minds on the numbers,” he said. The Nigerian issues may be worth as much as $1 billion and the Zambian debt may reach the kwacha equivalent of $500 million.
It said African countries are stepping up sales of local and foreign debt, targeting funds for infrastructure on a continent where many lack regular access to services such as water and electricity. The offers come as borrowing costs increase amid speculation that the Fed will begin scaling back a United States debt-buying programme that pumped cheap money into assets around the world, including emerging markets.
Dud cheques
Bank customers issued dud/dishoured cheques worth N166 billion last year, the CBN had said. CBN Acting Director, Financial Policy and Regulation, Y.B. Duniya said in a circular to all banks and financial institutions that over 167,507 dud cheques were issued and processed by deposit money banks from January to December last year.
He said that henceforth, the CBN, in order to check this malaise will forward the account details of erring customers to the Economic and Financial Crimes Commission (EFCC) for further investigation and prosecution.
Duniya said the enormous volume of dishonoured cheques in the financial sector has shown no sign of abating. The implication of the development, he said, is the low confidence generated in the use of financial instruments, which adversely affects the CBN’s cash-less policy aimed at reducing the volume of cash-based transactions and businesses in the country.
The CBN director said that over-indulgence of cash in the economy increases the cost of banking services, raise the incidence of crime and facilitate money laundering.
FAAC
The Federal Government may resort to bank loans and external borrowings to fund gaps in revenue shared by states under the Federation Account Allocation Committee (FAAC). This has become exigent as revenue from oil drops. Managing Director, Financial Derivatives Company Limited, Bismark Rewane, hinted on this possibility in this month’s Economic Report obtained by The Nation.
He explained that total federal allocation shared in first half of the year was N3.3 trillion, about 13.74 per cent higher than the N2.92 trillion shared in the same period of last year.
However, the revenue from the Federal Account in July and the remaining months in the second half of the year is expected to fluctuate within N500 billion to N900 billion as in previous months.
He hinted that a decline in the federal allocation remains possible, and will have a downside risk to the naira as the government battles with ways of bridging funding gaps.
Rewane explained that a depreciation of the naira would result in a depletion of external reserves and consequently affect the federal allocation. Also, further decline in oil price is expected to increase the disparity between the approved budget and revenues leaving government with the option of relying on bank loans and or external borrowing to manage the funding gap.
He said July inflation is estimated at 8.99 per cent against 8.49 per cent in June. This, he said, would be fuelled by increased demand for consumer goods as Ramadan begins. “There was also a decline in average inter-bank interest rates in first and second quarters of the year as they averaged 11.6 per cent and 12.2 per cent per annum.The naira equally depreciated at the parallel and inter-bank markets in first quarter,” he said.
Currency in circulation
Currency in circulation fell by 2.5 per cent to N1.47 trillion in April, a report from the CBN had shown. This is in contrast with an increase of 4.9 and 3.4 per cent at the end of the preceding month and corresponding period of last year.
The development, the apex bank said, reflected, wholly, the 4.6 per cent decline in currency outside banks component. Total deposits at the CBN amounted to N6.1 trillion, indicating a decline of 10.2 per cent below the level at the end of the preceding month.
Bank to bank report
FirstBank of Nigeria Limited signed a $100 million facility agreement with China Development Bank (CDB), a leading bank in the Peoples’ Republic of China.
In a statement, FirstBank said the agreement was in line with its bid to boost lending to Small and Medium Scale Enterprises (SMEs) in Nigeria. It is also expected to stimulate economic growth in the country.
According to the statement, the signing of the landmark agreement, witnessed by President Goodluck Jonathan, who was on a state visit to China; and his host, President Xi Jinping of China, reinforces the bank’s leadership position as a National Icon and Global Player.
The FirstBank Group Managing Director, Bisi Onasanya, is a member of the Presidential delegation, which also includes four state governors and 10 cabinet ministers.
According to the document signed by the managements of the two banks, both lenders will work together to further strengthen the business co-operation between both parties within the framework of each party’s respective articles and memorandum of association and applicable laws and regulations in Nigeria and China.
United Bank for Africa (UBA) Plc has introduced the World MasterCard, which is the most exclusive card in the MasterCard staple.
In a statement, the bank said the introduction of the product is consistent with the bank’s focus of providing appropriate product to every customer segment, including high net-worth customers who cherish rare and exclusive privileges.
Head, Cards, UBA Plc., Adidèjì Olówè, said the card programme, which is available by invitation only, can be tied to any of Naira, US Dollar, Pounds Sterling and Euro domiciliary account.
He emphasised that the product offers a chockfull of benefits such as travel accident and inconvenience insurance; extended warranty; purchase protection; concierge services; and emergency cardholder services. The card, Adédèjì stated, is exclusively made from a rare alloy of silver nickel, only a few materials of which exist in the world.
“The heft of the material is its signature. The recognition of the programme has afforded it the highly coveted MasterCard premium hologram. In addition, there is a great security service protecting our esteemed customers everywhere they shop with Fraud Protection and MasterCard Zero Liability,” he added.
Access Bank UK Limited has announced that Assets Under Management (AUM) in its private banking and asset management business rose by over 200 per cent to $18.5 million by the end of last year. Also, the bank’s AUM stands at $66 million.
In a statement, the bank said the increase in AUM has been driven by the ability of Access Bank UK to deepen its client relationships by expanding its product portfolio to its clients beyond the traditional focus on banking and asset management services.
“Buy-to-let property loans, Investor Visa and discretionary portfolio lending provide new routes for customers to access hard currency outside of Africa. Access Bank UK provides private banking services to African/Nigerian Ultra-High Net Worth Individuals (UHNWIs) in the UK and Sub-Saharan Africa. Services provided include traditional private banking services, property and discretionary portfolio lending,” the statement said.
